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Weekly UpdatesNigeria has four oil refineries with a combined nominal capacity of 438,750 b/d. But they are only running at 87,750 b/d and their proposed privatisation - they have been on offer for several years - has been the subject of serious controversy since the presidency of Olusegun Obasanjo which ended in late May 2007. Since early 2005, the federal government in Abuja has pursued a new approach, offering upstream E&P advantages to companies investing in the oil refining and power generation sectors; yet this approach, too, has not brought satisfactory results as no new E&P-related refining project has been launched so far.
In parallel, plans for several private oil refining projects have been delayed due to heavily subsidised fuel prices on the Nigerian market. Abuja has issued almost 20 private refinery licences after opening up the country's downstream sector to local and foreign investors.
Apart from the four refineries, there are three petrochemical plants in Warri and Kaduna. The Eleme petrochemical plant is currently in Phase-I of a three-phase development programme (see down7NigrPetchAug17-09). There are various gas projects encompassing downstream operations.
The Department of Petroleum Resources (DPR) in July 2009 released the performance chart of Nigeria's upstream and downstream operations for the first quarter of 2009. According to the agency, during the period under review, the average capacity utilisation of the refineries was a paltry 18.9%. A highly-placed APS source in Abuja on Aug. 8 said the plants' utilisation rate by then had risen to 20%. More than half of Nigeria's crude oil and condensate production capacity has remained shut in due to violence, although the main militants in the Niger Delta on Aug. 6 began a 60-day truce (see omt6NigrFieldsAug10-09).
The Group Managing Director of the state-owned Nigerian National Petroleum Corp (NNPC), Muhammad Barkindo, in late July said the Port Harcourt and Warri refineries had run out of crude oil and were closed due to the damages on the Nembe-Port Harcourt and Escravos-Chanomi pipelines. He added: "what we currently have will last for 15 days and after that it will finish. The consequence is that no refining would take place and no product would be available from Kaduna because the pipeline that would have supplied crude to Kaduna was vandalised and until it is repaired, we cannot pump crude".
The energy crisis in the country is indeed serious, with Nigeria's imports of liquid fuels averaging more than 320,000 b/d of crude oil equivalent. There are longer power cuts than in previous years (see down5NigrEnBaseAug3-09). Sunday Trust last month quoted an unnamed official of Petroleum Marketing Company as forecasting that the volume of fuel imports would decrease. He said local fuels marketers were "in a fuss over some money owed them under the Petroleum Support Fund", adding: "I think this is not a favourable period for Nigeria".
ONGC Videsh (OVL), the external arm of India's state-owned Oil & Natural Gas Co., on Aug. 5 was reported to be intending to have a 180,000 b/d export refinery in Nigeria built as part of a plan to acquire two deep-water oil E&P blocks. An OVL executive was quoted as saying the investment was to be made through ONGC Mittal Energy, OVL's Cyprus-based JV with steel tycoon L N Mittal. He said ONGC Mittal was to invest $359m in the two blocks. He said an "empowered committee of secretaries" had cleared the investment proposal, "which will now go to the cabinet committee on economic affairs for final approval". Of this amount, to be invested over five years, $195m was to go towards equity in OPL279 oil block. The balance $164m was to go into OPL285. OVL had already invested $84m in pre-exploration work on these blocks.
The executive said the JV had committed to spend up to $6bn in oil E&P/refining, railways, construction, power and commercial agriculture. In contrast, Chinese companies have already invested $3bn into Nigeria. In 2005 this Indian JV had signed an MoU with Abuja for the two blocks, expected to produce 120,000 b/d of crude oil. The executive said the Nigerian government had agreed to invest in the refinery, adding: "The understanding provides for delivery of 450,000 b/d of crude oil and 200,000 b/doe of gas for 25 years". He said this was to be OVL's third move into Nigeria. Its first attempt, for the OPLs321 and 323, got stuck in a legal tangle with state-run Korean National Oil Co. (KNOC). The battle to win controlling participation in these two blocks is yet to be decided by the Nigerian Supreme Court. However, OVL succeeded in acquiring 15% in another block - Sao Tome JDZ - through its Nigerian subsidiary, OVL Narmada.
Nigeria's top fuel retailer and gas distributor Oando Plc on Aug. 3 said it had received shareholders' approval to raise 200bn naira ($1.34bn) through debt and equity over the next two years to expand its business. Oando has been investing in oil E&P over the last few years (see gmt6NigrFieldsAug10-09) to diversify its low-margin fuel retail business and take advantage of plans to deregulate the downstream sector. Oando, which is also listed on the Johannesburg stock exchange, said the new cash will be used to expand its business in the mid- and upstream oil and gas sectors, including oil E&P and expansion of its oil rig fleet and gas distribution pipeline.
Oando CEO Wale Tinubu said: "We will now proceed to get necessary approvals from regulatory authorities in Nigeria and South Africa with a view to commencing the fund-raising [in] this quarter". Oando sells or distributes one in five litres of petroleum products in Nigeria. Oando is a key player in gas infrastructure in Africa's biggest oil and gas industry, operating a 200 km distribution pipeline in the commercial capital Lagos and south-eastern Nigeria.
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